Fisher Investments recaps the biggest market, political and economic news from last week, including monetary policies for the US Federal Reserve, Bank of England and Bank of Japan, eurozone inflation data and Chinese May retail sales.
In the US, the Conference Board’s May Leading Economic Index (LEI) fell 0.4% m/m from the prior month—worse than expected. May manufacturing and industrial production rose 4.8% y/y and 5.8% y/y, respectively. May retail sales decreased 0.3% m/m, but after stripping out automobile purchases rose 0.5% m/m, above expectations. The Federal Reserve announced a 75 basis point increase to the federal funds rate, bringing the new target range to 1.5% - 1.75%. While many remain hyper-focused on the Fed to combat rising inflation, in our view, it is important to remember the Fed’s ultimate influence is smaller than most people think. Monetary policy is just one tool that influences money supply growth, which in turn should be evaluated as part of the broader economic backdrop. For more, please see our 6/16/2022 commentary, “The Good News and Bad News in Today's Fed Move.”
In the eurozone, April industrial production fell 2.0% y/y, but rose 0.4% m/m. May core consumer prices (excluding energy, food, alcohol and tobacco) rose 3.8% y/y, meeting expectations. In the UK, April industrial production increased 0.7% y/y, but decreased 0.6% m/m. April manufacturing production rose 0.5% y/y, but fell 1.0% m/m. The April unemployment rate ticked up to 3.8% and the Bank of England (BoE) raised its main bank rate by 25 basis points to 1.25%. April GDP contracted 0.3% m/m, worse than expected. In our view, this seemingly weak GDP report also features some reasons for optimism. For more please see our 6/13/2022 commentary, “Silver Linings in UK GDP.”
In Japan, April retail sales were revised to 3.1% y/y and 1.0% m/m, respectively—up slightly from initial estimates. Final April industrial production contracted 4.9% y/y and 1.5% m/m, respectively. Preliminary May exports and imports increased 15.8% and 48.9%, respectively. The Bank of Japan (BoJ) met on Thursday and left its key short-term interest rate unchanged at -0.1%. In China, May retail sales fell 6.7% y/y, better than anticipated. May industrial production increased 0.7% y/y, more than expected.
The Week Ahead:
The US, UK, eurozone and Japan release June flash purchasing managers’ indexes (PMIs). The UK and Japan report May core consumer price data. The UK releases May retail sales.
Tip of the Week:
US financial markets and Fisher Investments’ offices will be closed on Monday, June 20 in observance of Juneteenth, which was established as a federal and stock market holiday in 2021.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.